Cold Calculations: The Economics of Snow

The US and parts of Europe are now enduring another of what seems like an endless series of snow-related emergencies.

It's become so serious that weather forecasters have taken to naming snow storms as they do hurricanes (though with notable lack of interest on the part of a beleaguered populace).

They are even running out of cutesy names for the impact: snowpocalypse and snowmageddon having been applied more or less continuously over the past few years. One can only imagine the advent of the next snow-sharknado from narratively challenged forecasters.

But the economic impact of these extreme weather events is real. Elected officials have lost their public mandates, sales and broader economic performance measures have been affected and even health statistics reflect these influences. As the following article explains, some product sales increases make intuitive sense - cold medications, shovels, four-wheel-drive vehicles (with heated seats). Some are curious - the rich buy more food, the poor buy less.

Even those who missed the memo about climate change and vainly hope this means global warming concerns were misplaced are wont to behave differently under these conditions.

So if you are sitting at home today in Atlanta or Washington or New York, contemplating a white Presidents' Day weekend - and hoping it melts before you feel compelled to start digging out - remember that the entire economy is feeling this, not just you. Oh, and speaking of economic impact, it's 70 degrees and sunny in Florida today. JL

Jeffrey Sparshott reports in Real Time Economics:

Economic research looking at weather shows that extreme cold can increase mortality, reduce spending on food among the poor, increase spending on food among the rich and boost sales of sport utility vehicles. Parents can rest easy: school snow days dont have much impact on educational achievement.

Cold and snow can have strange, often negative effects on people.

A massive winter storm blanketed the Southeast with ice and snow Wednesday and turned up the East Coast on Thursday, shuttering businesses, disrupting travel, closing schools and knocking out power. The storm has been blamed for several deaths.
Indeed, extreme cold can be extremely unhealthy.
“We estimate that the number of annual deaths attributable to cold temperature is 27,940 or 1.3% of total deaths in the U.S.,” Olivier Deschenes, an economics professor at the University of California at Santa Barbara and Enrico Moretti, an economics professor at the University of California at Berkeley, found in a 2007 research paper. “This effect is even larger in low income areas.”
Extremely hot weather isn’t good for your health, either. But cold, which seems to exacerbate cardiovascular and respiratory diseases, has a longer-term impact. The elderly and poor are particularly vulnerable.
Cold weather also has an outsize effect on food budgets. Researchers including Jayanta Bhattacharya, a professor of medicine at Stanford University, found that poor parents eat less — and reduce their caloric intake — during cold weather shocks as heating bills rise.
“Our results suggest that poor American families with children face stark choices in cold weather,” the authors wrote in a 2002 study. “In particular, they increase home fuel expenditures at the cost of expenditures on food and nutritional wellbeing.”
Rich families spend even more to warm their homes, but they also buy more food.
Not all research is so dire.
“After a snow storm, an individual who is going to purchase a 4-wheel drive vehicle appears to be more motivated go to the dealership than buyers of non-4-wheel drive vehicles,” according to authors Meghan Busse, a management professor at Northwestern University, Devin Pope, a behavioral scientist at the University of Chicago, Jaren Pope, an economics professor at Brigham Young University, and Jorge Silva-Risso, a marketing professor at the University of California at Riverside.
Conversely, sales of convertibles aren’t so hot.
Parents, meanwhile, don’t have to worry that their kids are falling behind because of all the snow days.
Joshua Goodman, a public policy professor at Harvard University, said that schools appear to be prepared to deal with coordinated disruptions like snow days. Problems arise when bad weather hits and schools don’t cancel classes.
When schools are closed, all the students are off. But when some students are in classrooms and others are at home, teachers have to take more time getting everyone on the same page.
“These results are consistent with a model in which the central challenge of teaching is coordination of students,” Mr. Goodman said in the 2012 study.
To be sure, Mr. Goodman’s source data is from the Massachusetts Department of Education—a state that is perhaps more used to snow days than those in the South.